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3101-topic4_08_4_colour

3101-topic4_08_4_colour - Topic 4 lecture

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1 Auditing Topic 4 – Audit Liability Chapter 3 2 Auditor’s Liability - Overview 1. The auditors’ regulatory environment, including: Statutory liability – Corporations Act and fair trading legislation Criminal liability 2. Duties of auditors - Reasonable Person Concept 3. Liability to clients – due care 4. Liability to third parties under common law 5. Loss recoverable 6. Managing legal exposure & the expectation gap 7. Defences and exculpation 3 Audit Liability: regulatory environment Developments in case law which has expanded and then limited the realm of auditor liability Criminal liability has increased with new statutory offences, eg CLERP 9 and anti money laundering legislation Audit responsibility arises mainly IN COMMON LAW from contract and duty of care (action in negligence) Auditors’ duties and liability have evolved over time due to changed expectations – including statutory changes. Interpret principles in light of particular facts. 4.1 Regulatory environment 4 Contractual and Statutory Duties Law of contract – action can only be brought by the company against the auditor (privity of contract). Statutory duties: Ss.307-309: Duty to form opinion duty to report to members practice incorporated into statute; CLERP 9 breaches can lead to civil and criminal liability Prospectus disclosure Misleading and deceptive statements s1041H Common law duty to perform the audit with due care is more complex.
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